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Life After Debt: What It’s Like in the Third Stage of Personal Finance

I paid off the last of my debt in 2007, quit my day job in 2008, and have been working to build wealth ever since. As I wrote early last year, I’m in the Third Stage of personal finance: I’ve paid off my debt, built a cash cushion in savings, and am maxing out my retirement accounts. And after doing all of these things, I have money left over to spend on comic books and travel. I’m a lucky man.

For the past year, GRS readers have been asking me to write more about the Third Stage of personal finance. What’s it like there? What choices does a person face? What sorts of things does she do with her money?

Though I’ve wanted to respond to these requests, I haven’t.

For one thing, I’ve felt like there isn’t a whole lot to say. Mostly, the Third Stage of personal finance is like the earlier stages, but without the debt. I’m still pretty careful with my cash, but instead of saving to pay off past purchases, or saving my emergency fund, I’m now saving for other goals — like travel.

For another, I’m reluctant to talk about some of my spending. It’s not that I think I’m making poor choices — I’m not — but that taken out of context, some of the numbers look shocking. It’s very difficult to put yourself in another person’s shoes, after all.

Today, though, I’m going to write a little bit about the Third Stage of personal finance. I’m even going to share some actual numbers. All I ask is that when you see these numbers, you understand that I’m making conscious decisions to spend this money, and I’m sacrificing other things in my life to make the purchases I describe.

The cost of fitness
Tonight was Guys’ Night Out. Or Geek Night. Or, as my sister-in-law calls it, Dragon and Troll night. Every month, my band of geeky friends gets together for some sort of activity. It started out as a chance to play Dungeons and Dragons, but it’s morphed into an ever-changing variety of events.

Tonight, for example, we headed into downtown Portland to watch the Portland Timbers take on the Minnesota Stars. The Timbers are the local pro soccer team, for which I bought a pair of season tickets last spring. (I paid $435 for two general admission tickets.) We geeks didn’t watch the game from the stadium, though; instead, we headed next door to the Multnomah Athletic Club. One of our group is a member, and he signed us in so we could watch from the club’s balcony, which overlooks the south end of the stadium.

The Multnomah Athletic Club is amazing. It’s posh — it oozes wealth. It looks like the sort of place where you might have to wear a suit and tie just to jog on the treadmill. Everything is dark wood and brass and wall-to-wall carpeting. The attendants at the door are in suits and ties. It’s not a very J.D. place.

“Wow,” I said to Josh as we waited for the game to start. “This place must be expensive.”

“I knew somebody was going to bring that up,” he said. “It is expensive, but my parents have been members for almost forty years. It only cost them $700 back then.”

“$700 for what?” I asked. “Per month?”

“No, $700 for the initiation fee,” Josh said. “I think the fee is getting close to $10,000 per family now.”

“$10,000?!?!?” I asked. “Just to join?”

“Yeah,” said Josh. “And there’s a waiting list to get in. Plus, once you do join, dues are about $200 a month.”

My mind boggled. I was about to say, “That’s outrageous!” when I realized: I’m paying $200 a month for my gym, too.

Whenever I talk about Crossfit and the amazing things it’s done for my health, I always leave out the cost. Yes, I’ve lost 30 pounds. Yes, I’ve dropped from a size 38 to a size 32. Yes, I’m stronger than I’ve ever been in my life. But this progress has come with a cost: $200 a month, to be precise. You know what? It’s a cost I’m happy to pay, and one I plan to continue paying. If this system is working — and it is — then it’s worth every penny. If I’m not fit, nothing else matters. (But again, taken out of context, this expense would look ludicrous.)

So, I admitted to Josh that I was paying just as much as he was for a gym membership. (But without any initiation fee, of course.) We stopped chatting as the match began.

The cost of fun
We watched the Timbers and Stars play to a 2-2 draw in front of a large crowd. As the game wound down, I used my binoculars to spy my seats for next year. In 2011, the Portland Timbers will join Major League Soccer, and last month I spent $1410 to purchase a pair of tickets on the mid-field line. I’m eager for the season to start, and the current season isn’t even over!

Walking back to my car after the game, I thought about that expense: $1410 for a pair of season tickets for a soccer club. A couple of years ago, I would have thought that was insane. I wouldn’t have been able to view it as a justifiable expense, no matter how much I had in savings, no matter what sorts of sacrifices I made in other parts of my life. I would have condemned it as lifestyle inflation.

Maybe it is lifestyle inflation. But it’s also an example of conscious spending. I love soccer, and I can afford the tickets. I’m meeting all of my financial obligations. When you’ve paid off your debt, saved for emergencies, and set aside money for retirement, whatever’s left over is yours to do with as you please, right? In my case, that means that if I want to buy Portland Timbers tickets, I can. I have no regrets.

These are the sorts of things I think about in the Third Stage of personal finance.

The cost of travel
There are still financial dilemmas in the Third Stage. Being here doesn’t mean I can afford everything I want. In fact, I’m always picking and choosing. (It’s just that the things I’m choosing between are sometimes more expensive than before.)

For example, Kris and I just learned about an opportunity to travel to Africa in February. Our college has put together a package tour for alumni that includes visits to South Africa, Botswana, Zimbabwe, and Namibia. It’s a 19-day tour and it costs $5600 per person.

Well.

I’ve been begging Kris to go to South Africa for a l-o-n-g time. I’ve wanted to visit ever since I read Cry, the Beloved Country. (Jolie Guillebeau doesn’t help by always reminding me that South Africa is her favorite place she’s ever visited.) Kris has always steadfastly refused to consider a trip to South Africa — until now. She actually wants to go on this tour, and so do I.

The problem is that even though we’re in the Third Stage of personal finance, $5600 (per person!) is a lot of money for a trip. Especially considering we’ve already shelled out a lot for our upcoming journey to France and Italy.

Can we afford to take on the expense of traveling to South Africa in February? And if we can, is it something we really want to do? As I drove home from the game tonight, I thought about it.

First, I considered how to come up with the cash. We’ve already funded our trip to Europe, so that’s not an issue. I just need to figure out how to come up with $5600 by February. (Because Kris and I keep separate finances, she has to come up with her own $5600. That’s not really going to be a problem, though. Remember: She’s always been the responsible one, and she has tons of money in savings.)

I considered my options:

Last week, I canceled my Cycle Oregon registration. Cycle Oregon is a week-long bicycle tour of the state, and I’ve always wanted to do it. But after riding 100 miles in one day last month, I realized I have zero desire to bike 500 miles in one week. I’ll be getting back about $750, which I could immediately set aside to save for Africa.

I could save up some of the money by going on a comic fast. I give myself a monthly comic-book budget, and if I were to reduce this to zero (or something near zero) for six months, I could accumulate a few hundred dollars.

I could borrow from my Mini Cooper fund. Yes, I bought a used Mini last year, but since then, I’ve been saving for an eventual replacement. The car is running great at the moment, so it’s probably safe to pull some money from this account.

Similarly, I could borrow from my tax account. I’m not sure I’ve mentioned it before, but I have a separate savings account in which I save for taxes due in April. (Because I’m self-employed, I’m responsible for setting this money aside myself.) I could borrow a few months of contributions from this account, and then double my savings efforts in the spring.

And most drastically, I could conceivably borrow from my emergency fund. It sits at $20,000 now, which is more than ample for most short-term needs. If I drew it down to $14,000 or $16,000 or $18,000, odds are I’d be able to replenish it without a problem.

Plus, I could make sacrifices in other areas of my life: I could eat out less often, I could make better use of the public library, and so on. At its heart, this is the same sort of decision I used to make, but on a different scale. Instead of trying to scrounge up $500 per person to spend a week in Victoria, B.C., I’m now trying to find $5,000 per person to spend three weeks in Africa.

Again, is this lifestyle inflation? If so, is it wrong? And do Kris and I really want to spend this much money on a three-week vacation? I don’t know, and I’m not sure how to find an answer.

Life in the third stageThese are the sorts of things I think about in the Third Stage of personal finance. Yes, we’re still growing and canning our own food, still looking for cheap entertainment, still shopping at thrift stores, and still asking for discounts whenever possible. Now, though, these aren’t techniques to help me get out of debt. Instead, they’re the steps that allow me to spend $200 a month for Crossfit, $1410 for soccer season tickets — and maybe $5600 to travel to Africa.

I’d love to hear from other folks who have reached this stage. What sorts of things do you spend on? Do you sometimes think, “Man, ten years ago, I would have thought this was outrageous?” Do you still make sacrifices in order to buy the things you want? Do you still practice frugality? If you’re in the Third Stage of personal finance, what’s life like for you? (And if you’re not there, do you find this sort of spending inspiring? Or is it intimidating? Infuriating?)

Note: As I was making my final edits to this article, I realized it’s a sort of follow-up to June’s post about the rewards of frugality and thrift, in which I described some other things I’ve been spending on recently.

My husband and I are in the third stage (no mortgage (tiny condo, though!), no car loan, no student loans, no credit cards) and we have allowed ourselves to experience a little lifestyle inflation (HBO, smartphones, gym membership). I say go for the trip – that’s what we spend our excess money on – next month, Ireland and Scotland with a group from the Irish Pub where he used to work!

I enjoy living frugally and I enjoy traveling out of the country every year. For us they go hand in hand.

@James (#149) and many others
I included the emergency fund in the list in interest of honesty and completeness. I’m sorry that you feel this makes my advice “inauthentic”. There are times when I make mistakes, and there are times I consider going against my own advice. To me, that’s called being human — which I am.

Also, I think there are some shades of grey that are being missed here. First of all, I’m not saying that I will use my emergency fund, but that I’m exploring the idea.

Second, the emergency fund is $20,000, enough to cover about a year of normal expenses. To me, that’s an important consideration. If this were a $1,000 emergency fund that I was thinking of depleting for the trip, that’d be different. But it’s not. It’s $20,000, and if I tapped it at all (which isn’t likely to happen), it’d probably be for $1,000 or $2,000 — money I’d replace as a top priority.

I am not so dogmatic to view this as a Super Bad Thing. I apologize if that makes some of you furrow your brow. It’s not a good thing, and it’s something I’m trying to avoid, but I certainly don’t think it’s worthy of fixating on.

Wow. Okay, JD, I think you said that your tax fund and your emergency fund are far larger than they need to be, yet people are still giving you aggro for considering taking money from them.

Looks like one lesson from this discussion is that maybe each of these designated funds should have a maximum amount, and then any overflow goes to a new Slush Fund account. Then, when these opportunities come up, you can tell us you would pay for it out of your Slush Fund, and people won’t hassle you. Oh, the lecturing people do based on labels instead of substance!

I know this might sound controversial, but I dont think its right or proper to tell someone else they *need* to give money to charity. JD has worked hard for his money and pays plenty in taxes. Its his right to spend it how he will. In no way does not giving 10% or whatever to charity make his a bad person.

I think the question of whether spending on luxuries (like a gym membership or extensive travel) is very different when you’re paying cash. As Dave Ramsey says, the point of living like no one else while you’re paying off debt is so you can live like no one else once it’s paid off. And studies have shown that spending money on experiences brings far more long-term satisfaction than does spending on possessions.
For me and my husband, the greatest benefits of being at Stage 3 are threefold:
1. Being a one-income family. Because we’re debt-free and living frugally, I can be a stay-at-home mom to our daughter.
2. Pursuing our passions, not a paycheck. My husband is a gifted and passionate photographer, but photography is generally not a lucrative profession. He can be a full-time photographer, anyway, because our monthly income needs aren’t that high.
3. Giving generously. When your budget isn’t dominated by debt service, you can afford to give to those in need. Ramsey also says, “Live like no one else so, later, you can GIVE like no one else” and “Build wealth, then give like crazy.” For us, this is the greatest and most important benefit of being debt-free.

@Brenton 155
People who are winning at money should learn to give, just like they learned to get out of debt. I don’t read this blog because its about being selfish. Its a blog about discovering what is winning.

Last year at the age of 33 I reached the third stage. my depts are Morgage on my house and 2 years of car payments on a new 2010. I still live the same lifestyle but now I increased my retiremnt saving to 15% of my net pay instead of 10%, considering I also have a good pension plan with the city I should be considered safe. I am putting aside 10% for future car purchase because eventualy you have to replace them. I also put 10% away for real estate investments. nothing like owning property where the tenant pays your morgage.

As for spending I am going to buy a triathlon bike mid range quality 3000$ I plan on starting up next year who knows maybe I can finish an Ironman in 2 years. I am also taking a trip to run Marathon Du Medoc in the wine contry of Bordeaux France. 2010 will be my first marathon and Im looking forward to checking it off the bucket list.

I find that when you have financial freedom to spend where you want to rather then where you HAVE to. This creates a situation where look internaly as a person, and it gives you freedon to find out who you are and where do you want to go in life.

JD – first thanks for the post on Stage 3 — I’ve been in stage 3 for years and would LOVE to see more posts or separate blogs about people and issues when you’re in stage 3 – so much of the normal personal finance posting deal with people just beginning to learn to be frugal and how to deal with debt. I was there years ago, and while it great to read this stuff and get reminders about the right things to do, it would be so nice to regularly read about the issues at stage 3.

@JD… if 20K is really too big for an emergency fund, maybe part of it should be relabeled. Or at least think about which part is absolutely vital.

I don’t do the “emergency fund”… I just have one big slush account that I replenish when it gets lower than a certain amount. But if I did have those mental accounts, I would assume that I had put in the right amount to cover emergencies for 3-6 months or what ever the goal is to cover emergencies. If 20K is too big, then the problem isn’t with taking or not taking money out, but with calling it an emergency fund. Maybe some of it is emergency fund and the rest is emergency buffer or something.

Emergency funds are for emergencies. If 20K is too much then relabel part of it and don’t touch the part that is actually your emergency fund.

@bystander (#150)
While I appreciate your viewpoint, berating me isn’t going to make me feel guilty, and it’s not going to accelerate the process of me learning to give. I’m working on it. Maybe not as fast as some would like, but I’m working on it. I’ve donated money to charity here and there over the past year, and Kris and I even volunteered at the Oregon Food Bank earlier this summer. I’d do it again, too. Plus, I’m intentionally setting aside proceeds from the upcoming GRS Blog Project for animal-related charities.

I’m perfectly aware that giving is a high-priority, hot-button issue for many people. I apologize that my values don’t match yours, but that’s how it is. That doesn’t make me a bad man!

I’m not sure which stage I’m in — I guess the 3rd? I make very little money (10.5k last year), but I still manage to save. It helps that the only debt I have taken on in life thus far was a car loan, and I paid that off two years early by taking on a second job for awhile.

That said . . . I’ve drained my emergency account for big travel — 4 months in Europe during college took every cent of the $6k I had saved up in high school. And I still made it work. What’s the worst that can happen? Say you take the WHOLE $5,600 out of “emergency savings” to make a deposit on the trip. You start paying it back right away. If you have an emergency . . . maybe you’ll be a bit short (tho a $15k emergency sounds huge!). But, likely, you will figure it out.

I suppose I might be hypocritical, as I’ve never ever had a problem with debt. Heck, I don’t even subdivide my savings — I just save money, and I weigh each purchase on its merit and not on the exact amount I have saved (as long as I have enough for it).

I guess my take-home distilled message is this: it would be a darn shame for you and Kris to miss a trip to Africa just because you were worried about spending money you saved just because that money is technically labelled “emergency savings.” I understand you did so to keep you from touching it for wants, and I understand this isn’t technically a need. But you have the money, you want to take the trip, and spending this money will not break you. I have every confidence that you’ll get it paid back fairly quick.

Life is short, and you don’t know what tomorrow brings. Be responsible, but carpe diem.

I have no problem with the idea that I ought to help those less fortunate than me. My issue is “how”. I don’t like the notion of simply throwing money at the problem. I think that’s ineffective. That’s why it felt good to volunteer at the Food Bank. I was doing something.

Coincidentally, I’m in the middle of prepping Sunday’s “reader story”. I had many to choose from, but I opted for a story from Bonnie, who spent two years overseas in the Peace Corps. Now that is the sort of thing I can get behind. I would love to constructive charitable work rather than simply throw money at a problem.

@165… Hey, don’t knock people who throw money at problems. Money is needed for many problems and some of us have more money than dedicated time.

There’s not much charitable work I can do in the few minutes it takes for a regression to run. Also not much one can do while simultaneously watching a toddler… volunteer organizations don’t generally like kids under age 7 around. Food pantries need food. Students need scholarship money.

I feel so contrarian today. But hey, both money and time are needed to solve the world’s problems. Should you go on this trip to South Africa? Where should the money come from? There isn’t a right answer. There’s only trade-offs… which was really the underlying point of this post. Don’t forget that point when it has moved to a different context.

You people and yourperceived high horses! JD it’s your money, you worked for it you do whatever you want to do with it. Geez! MYOB! Those who live in glass houses…..Some of these comments really piss me off.

Count me among those inspired by the 3rd stage conversation. I am firmly in Stage 2, with debts left to pay and nowhere near the savings I would like, but at the same time it’s important to live life now. I’m not going to rack up my debt again, but I may not save as quickly as I could. But we are years from stage 3, if we’ll ever get there, so it’s stupid to wait; yes we’d be in trouble if the worst happened, but that would be true regardless of whether we take that trip to Scotland.

Which we are. It’s been on our short list for years, and the deal of the decade just turned up. We’ve been saving some money, a wedding gift from my grandmother, for the two years we’ve been married, and that money will cover the airfare, hotels, rental car and breakfasts. I do have to squeeze a bit to save extra for the other meals, incidentals, tours, etc. But, see above, not going back into debt. And I just decided recently not to cut back on retirement/emergency savings or charitable giving, which had crossed my mind. (Using the e-fund is NOT an option – it’s just not big enough to risk.) Instead, any gift & bonus money this year will be saved for Scotland; instead of travelling to Canada 3x like I have the last few years I will go maybe once and put that money towards Scotland; I’ll cook at home more and buy lunch less (which I’ve been doing anyway since I started eating Primally – it’s awesome, JD, reducing grains & sugar have made an ENORMOUS difference in the quality of my life). All these things will help. And if March approaches and the Scotland fund still looks small, I will consider more drastic action – like requesting an early b-day gift.

Do it, JD, and love it. Anyone who’s read your blog for more than 5min knows that you will put your whole self into recovering any savings goals diminished by this opportunity. That will happen way quicker than another chance like this coming around.

I think a trip to southern Africa is a great idea, but I understand your wife’s nervousness. Even though I had lived and traveled in Asia for two years, when given the opportunity to move to sub-saharan Africa for 6 months, I was extremely anxious about safety and disease. I ended going and it was one of the best decisions I’ve ever made. I found traveling there to be easier for me than in Asia in some ways because there was less of a language barrier and the cities I spent time in were less crowded. I also went on a 3-day all-inclusive camping safari in Botswana and it was amazing-and only cost $300 per person.

I think the trip sounds a bit over-priced, but the people I ran into who were on group tours in the area that you are going to looked like they were having a great time, so I’m sure you’ll enjoy it.

Go on the trip to Africa – if Kris is willing to go on this trip, strike while the iron is hot and take advantage of that situation! Africa is awesome and is a memory I will cherish forever. You are in good financial shape and this will not be a hardship for you, so I say go for it.

While I wont lecture on charitable giving
Ill simply observe that while its easy to say that you don’t want to “throw money at a problem”,lots of problems require money. It would be unrealistic of you to think otherwise. I am a great believer in hands on work. going down and helping with the food bank is a wonderful thing. But really, now on earth do you think that food bank got the food that you helped give out? How on earth do you think my local dog shelter gets food to feed the dogs? They get money because people like me donate. Its also worth noting that lowincome people give a larger percenage (not amount) of money than higher income folks-the percentage is often double. Surely you have SOMETHING besides yourself that you care about enough to give and donate to? I’ve been here a short time and as such had not realized that you don’t give time and talent to help others. What a shame.

I understand the harping on whether JD should take money out of his emergency fund for travel.

But I also understand why he is considering using it. We are traveling next week, our summer vacation, and since I didn’t save up quite enough in time to pay cash for our entire trip, I moved $1000 out of our emergency fund to do so. What does that mean, it means we will have $26,000 in our e/r fund instead of $27,000 for a couple of weeks. It means we will have $43,000 in targeted savings instead of $44,000 for a couple of weeks. In the end it doesn’t mean much because we have plenty of savings.

As your emregency fund and savings gets larger it doesn’t necessarily need to be so restricted.

It’s interesting to see the various values people place on things. My husband and I discussed this recently, particularly how shocked people would be at how much we spend on really good coffee and electronics, and how little we spend on things like cars, clothes and furniture. For example, my husband got me a $550 digital camera for our 10th anniversary, but neither of us can bear to spend more than $100 for a couch.

Everyone’s ideas are different; that’s what makes the world interesting. We aren’t in the 3rd stage of personal finance — we’re close, as we slowly close in on paying off our credit cards — but I find stories like this to be interesting and also encouraging. I *used* to be in a much better place financially, but life/marriage/kids destroyed our finances for a time. Remembering what it was like to be able to pay cash for everything, or to travel, keeps me motivated to keep paying off our debt.

Simply said I love this site. It sure does keep my mind focused. I’m on the debt snowball stage on car and student loans (cc’s are done!). I look forward to the day that I can tell my wife to travel to California for a vacation with me and not worry about $1000 in costs…. I’m reading this blog exactly so I CAN live life more fully, even though it takes initial sacrifice.

What does DR say?
Life like no else, so later you can live like no one else! Good luck!

I’d say divert from the mini-cooper. I personally think that paying off the mortgage though should be an even higher priority than a car. I think the TRUE stage 3 is ZERO debt, retirment accounts maxed, a portion to mutual funds/investments, THEN live off the rest. Later you’ll the money will end up making more than you

Hey JD,
the part of this article that stuck-out the most to me was that you and Kris keep separate finances. I’m wondering how that works. This my be none of my beeswax, but I think an article about that would be fascinating.
-danielle

There is nothing wrong with looking at your situation and reprioritizing. The new car, for instance, is a luxury you are saving for. It’s not something that is death-and-taxes inevitable. If problems with your current car arise before you’re fully funded, and push came to shove, there are lots of transportation options out there less expensive than a mini cooper. So I’d say that fund is totally fair game for repurposing. As far as the emergency fund, I don’t see it as completely off limits either. It all depends on your tolerance for risk, and how much it takes to make you feel comfortable. If you’re okay with the idea of a smaller security blanket/emergency fund, then you are probably a bit overfunded in it anyway. And this trip is an opportunity that may NOT just drop in your lap again. I’d say go. Save what you can for it, repurpose your funds as necessary, and then re-evaluate and deal with replenishment (if necessary) when you get back. Money is a tool.

To those that feel J.D. isn’t giving his time or talent to help others –

Why on earth has this post gotten 175+ comments? Because J.D. spends his time and talent discussing, as an honest, open human being, how he manages his money. And I’d argue that well before this blog became the success that it is today, he did it voluntarily to help others like himself. And he continues to lay it on the line to help others, and it must be working or we all wouldn’t keep showing up.

So lay off of him if he doesn’t volunteer or give of himself in the same manner that you do – he still gives of himself nonetheless, in a way that works for him.

Awesome post and awesome comments, except the charity mongers which I find quite offensive. The blog name, Get Rich Slowly, drew me in. Revealing your personal struggle with debt kept me interested. A few teaser 3rd stage posts which elicited comments from me put your blog in my bookmarks. Finally a full blown 3rd stage post with so many comments cemented my interest in you blog. Thank you so much J.D. you should really start a new blog about the 3rd stage. I find the 3rd stage challenging and for a while I searched for other blogs that might have more insight regarding this. I still feel yours is the best. Although Suze Orman’s “can I afford it?” and “how am I doing?” segments touch on it and is quite entertaining. Life is about balance, finding it is tough.

Anyhow, I want to thank you again for this post and most of the commentators who put the 3rd stage of PF in a brighter light.

I’m in the third stage with not even a mortgage–and it’s a nice place to be at 30. While I still put away $40k-50k per annum in various savings vehicles, I spend serious amounts of money on original artwork. Everywhere I look around my home, I see something that catches my eye, be it an abstract that makes me think, an oil of a rainy Parisian street scene that reminds me of my time there, or a signed cell from one of my beloved comic books.

@tb (#114): For me, paying a fitness membership is not about having access to fitness equipment. If just owning fitness equipment is enough, then the obesity rate wouldn’t be so high in the US. That fitness membership is about having someone poke and prod and sometimes yell at me to get into shape.

For everyone who consistently brings up charity: Why do you assume others don’t donate? Not everyone feels a need to announce his or her good deeds to the world.

I think it’s great that JD is working towards giving more–in time, in money, etc. Maybe it’s true that he should ideally give more than he does now–but everyone starts somewhere, and changing one’s habits is hard. He should be commended for working towards that.

I agree with everyone who said that aid organizations need monetary help. I think what JD might have been getting at was more the idea that some aid organizations don’t focus on lasting solutions to the problems. If you give a hungry person a sandwich today, that is great–it is a wonderful thing to prevent hunger for a day. But that person will be hungry again tomorrow. It would have been better if you could have given that person something that would have done more to solve the problem at its root.

JD, in this connection you should look into Heifer International. That is exactly what they do. They give families animals, teach the families how to take care of them, and each family has to give one of the animals’ offspring to other families in the village. Slowly the family becomes economically self-sufficient (they can sell milk, eggs, etc.), and the village as a whole is permanently less poor. Heifer International is really working to provide lasting solutions. (Note: I am in no way affiliated with them. I just think they’re a great organization that I like giving to.)

So, JD, maybe you could consider a regular contribution to an organization like Heifer. Starting small is good. As everyone says about saving, getting into the habit is the most important thing. It’s ok if it’s not a large amount at the beginning. A little money can do a lot of good.

We are all working towards becoming more generous and more giving. Each person just has to start where he is and work from that position. I think it’s great that so many people have written in to remind JD about charitable giving, but I think it’s important too to remember that each person needs to learn to do this on his own, at his own pace, in a way that is right for him.

I haven’t reached that stage of financial planning, but I think the whole point of being in control of your financial situation is to allow you to do things that will make you happy. If you guys really want to go on this trip to Africa and it seems like a good deal at a good time, then you should absolutely allow yourself to do it without having to justify anything to anybody! Being able to have those kinds of adventures is what you’ve worked for, so enjoy it (and keep telling the rest of us about it, so we remember what we’re working so hard for, ourselves!)

J.D., you might be interested in helping people through micro-finance. I’ve been lending some money to small business entrepreneurs in under-developed countries who often have difficulty in assessing resources–including loans, skill training, etc–within their own societies. I like the idea better than charitable donations (which I do when natural disasters or other things that demand urgent help occur) because of its effectiveness and sustainability in terms of helping promote people’s economic independence and a sense of responsibility.

I’ve been doing this through http://www.kiva.org, but there are some other organizations doing the same. The money repaid I keep re-loan to other entrepreneurs, and this process keeps going on and on and on around the world…

* As for your 3rd stage, well I don’t have much to comment about that, either positive or negative. You make your choices in life and take your responsibility. I just wanted to chime in with the above info of micro-finance in case you might want to look into it.

@182
I, too, have heard of this organization.
In the past I have given a great deal in time and talent. At this point I have moved to a place in my life where I currently don’t. This would be a great way back in. Thank you for bringing it up Meg. Off to check it out.

The ability to spend this money on stuff that’s important to you is kind of the whole point of personal finance! You can get so much more from your money when you’re not throwing it away on credit card interest.

I’m not sure I’d say I’m in the third stage of personal finance. By some measures, I am, but I still worry about money because the future is so uncertain; no matter how much I save, I can never be sure I will have enough. I make a lot of money from overtime, which makes me nervous because overtime isn’t guaranteed. I live on my base pay and save everything I make from overtime.

Sometimes I will make a big purchase from that large amount of savings, and it makes me feel a little guilty. I kind of feel like a frugality fraud for buying a $900 big screen TV, even though it barely made a dent in my savings. I’m glad I’m not tempted by travel; I would never want to spend $5600 on a trip, but if I really wanted to, I could. In a way, the best part is just knowing that I have all this money available if there is something I really want. I am still pretty frugal and I make a lot of sacrifices (I clip coupons, almost never eat out, and haven’t turned on the air conditioning all summer even though my house is currently 82 degrees). On the other hand, I am leasing an Audi, which a lot of people surely consider frivolous and even irresponsible, but I can afford it and it’s how I choose to spend my money.

I have to agree with Rachel, #17. While you’re obviously extremely successful and can probably afford the trip to Africa, I had to ask myself if this post was really written by J.D. and if it was, is it some kind of late April Fool’s prank. I mean…J.D. borrowing from his emergency fund for a trip to Africa?! Blasphemy!

Wow thats a lot of comments! I didn’t through all the comments, so forgive me if this is a repeat.

First of all, it is great you are talking about this stage. Life doesn’t stop with debt-free… and unless we make conscious effort to (1) do what we love AND (2) stay out of debt we will go right back to the stage 1. First stage JD would have probably talked about which credit card to charge this and then pay it off later. He is now thinking things through and know what he would lose if he has to take this trip (like he is ok with delaying buying a mini cooper for the price of taking the trip). So I feel this is an excellent post on “still-learning” in the third stage.

I don’t know what stage we are in. We don’t have any debt, but we are saving for a down payment, so every step we take, we debate whether it is worth delaying the house buying for us. Some of the trips/stuff are not worth it, so we have skipped. Some of the expenses like charitable contributions are worth it, so even though we have been advised to reduce it to reach our goal earlier, we are staying put. On the same note, JD, have you considered contributing to charity. Just as suggestion… you could start small and try… If you are not already giving that is.

I think the best part about “life after debt” is that, as long as you remain disciplined with money, you can make it as “custom” as you want. You don’t owe anyone money, so you have more control over where you send your money – and you can spend $200 per month on a gym. Other than real estate I’m a year from being debt free (student loans). Real estate debt may take a little longer to work though – I’m working on a plan for that, but it’s complicated.

I salivate thinking about what I could do with the $472 per month I currently pay in “Sallie-mony.”

I’d like to bring up a point about lifestyle inflation. Part of lifestyle inflation that makes it dangerous is the part where you stop enjoying each new thing and come to believe that it is part of your everyday life. This new lifestyle then can cut into your savings in a mindless way.

Your trip to Africa sounds like a once in a lifetime experience. Even though it is expensive I bet you’ll remember it when you are old and gray. You may be traveling more, but you are working hard to make money to do the things you like to do. Money should give you freedom, not hold you back.

You are very mindful with your money and seem to be making decisions to spend more money on things that are important to you (good food, exercise, wellness…) and not giving into things that really are hallmarks of lifestyle inflation (spending money on treats and not having any money for savings).

You go on this trip, JD, it’s unbelievably hard to get visas if you do it yourself. Just ask your friend Chris G. (I also follow his blog.)

I spend on travel. I am not a roughing it kind of girl and I want things to be as smooth as they can be. I’m going to Europe this September and it’s fully paid for in cash. It’s nice to know you can do things whenever you like because you can afford it. It’s obvious you are still keeping tabs on what’s important to you (shades of Trent here) and spending on that, and cutting back on those that are not.

My Dad always told me that the difference between someone that is broke and one that saves, is that the guy who wastes his finite resource (time,money) is at the mercy of their situations. Whereas, someone who has been diligent with their resources, within reason, can get what they want and not have to settle.

Take the trip to Africa, you’ll be safer in a group, and you never know if the opportunity will present itself again.

Oh I forgot to mention this little bit.
They say that you can have anything you want but you can’t have everything you want. That sums up the third stage nicely IMHO.
The biggest (in terms of cash amount) decision I’m working on is how to buy a home as well as fund my retirement savings. The thing is I want to buy a home without a mortgage. However, as I’m crunching the numbers, I am slowly realizing that it *might* make sense to take on a small mortgage and use the money I’d save on rent for retirement savings. I could also borrow money from my retirement savings to finance the home purchase. I’m trying to work out whether it would make more sense to borrow money from myself or the bank, when the “right” time would be (not in terms of market timing but rather in terms of total amount(s) saved) and how much. Rents seem to be rising steadily around here so at some point it might make sense to buy for me.
Right now is not that time though.

Giving to charity is probably a lot like saving money; you need a reason, a worthwhile goal, or it won’t work.
Unless you feel that your contribution to charity is doing something and actually working as you intended, it’s easy to get discouraged and just quit, or never start giving in the first place. If you save money but have no idea why, odds are you won’t do it for very long.

That’s why it’s so important to find the right kind of charity for YOU and figure out what YOU can do. It’s not just so you can feel good about yourself and say that you are making a difference for “the little guy” but rather that you will be inspired to CONTINUE making a difference.

This is one place I would be proud to say I’m in Stage 3. It many circles, I kind of feel this mix of pride and guilt (for that pride) when I tell my peers “yes, the house is paid for”.

We’ve got to the place where we live off a little under my husband’s income so we put all of my income and whatever’s left of his into all sorts of places of saving. After we set aside our emergency fund, we started little pockets of opportunity fund. One for travel, one for a business idea and 2 more for our spending.

The thing is, this money is good for our spending but we don’t even spend much of it so it kind of just accumulates. We even started giving more money away (I’m stating this more like fact) because we feel that, we really don’t need THAT much money and it could go further elsewhere. It’s not that we don’t do anything, but this is still the leftovers!

So what’s it like? Well, when the iPad came out I found myself in an interesting place. It was a WANT but I had been considering an e-reader for a few months already. So, it seemed like I didn’t put in much thought to it and just plonked down the money for it. I didn’t find it cheap, but I found that I could do it without guild and I could enjoy all of it. As a lady, I don’t shop much, when I love tech toys, so my husband was all for it.

When the iPhone 4 came out, it would have been easy and acceptable to do the same. But, I have a perfectly usable phone so I’m not replacing something that is spoilt or getting something new that fits into my life in a different way. So this time, I didn’t go ahead with it.

Giving in to my WANTS so easily becomes lifestyle inflation when you can afford it and then you start to do it without much thought precisely because you can afford to. But if we get too used to it and it gets taken away, then it becomes painful, so we try to stay away from that.

I’m stage 3++ with lots in the bank too, but I still worry about finances like I’m not.

With the economy in the tank (still!) I feel like I shouldn’t spend much until I have met *all* my financial goals for 10 years from now, even though I have a stable, high-paying job and my planned ongoing savings should cover everything just fine.

For example, even though my kids won’t start college for 7 years, I won’t feel comfortable spending on non-essentials until I actually have all that money saved, & etc.

I struggle with whether this attitude is sensible (given what the economic situation is likely to be in the next decade) or ridiculous. I can’t decide!

So, J.D., unless you’ve really way past the break even point, I do think that spending $11K on one vacation (in addition to your other international vacation this year, and all your sports spending) is a bit too much. Like others have suggested, will you even really enjoy two intense international vacations only a few months apart?

I’m also disturbed by your elaborate plans for borrowing from your other accounts for the S africa vacation. Justify much?

It comes down to the fact that you actually don’t have the money for that vacation right now. Like others have pointed out, S Africa isn’t going anywhere after this year, and there may be cheaper & more enjoyable ways to vacation there if you spent the time to research and save for that vacation.

I also think you might be a victim of “shopping momentum”, given all the spending you’ve listed recently.

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